Golden State Transit Corp. v. City of Los Angeles

United States District Court for the Central District of California · Torts

TortsSection 1983Prejudgment InterestDamages42 U.S.C. § 198342 U.S.C. § 1988prejudgment interestfederal common law

Facts

In 1981, the City of Los Angeles refused to renew Golden State's taxicab franchise until Golden State settled a labor dispute with its drivers, denied Golden State a rate increase that was later granted to other taxicab companies, and denied Golden State's request to lease taxicabs. Golden State sued under Section 1983, alleging that the City's conduct was preempted by the NLRA. After extensive appellate proceedings, liability was established and a jury awarded Golden State $4.5 million in compensatory damages representing the value of its business in 1981. The parties stipulated that the court, rather than the jury, would decide prejudgment interest after the verdict.

Issue

Whether prejudgment interest is available on Golden State's Section 1983 compensatory damages award, and if so, what law governs, what rate should be used, and over what time period interest should be calculated.

Rule

When Section 1983 and Section 1988 do not expressly address prejudgment interest, a court should first look to federal law under the Section 1988 framework; if federal law provides sufficient guidance, federal law governs. Under federal law, prejudgment interest is an element of compensation and may be awarded in the trial court's sound discretion, guided by fairness and balancing the equities, to make the injured party whole. The appropriate rate is ordinarily the Treasury bill rate unless substantial evidence shows the equities require a different rate.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A software licensing company in Phoenix wins a Section 1983 jury verdict against the City of Mesa for $2 million in compensatory damages based on a federal statutory preemption theory. The governing federal statutes do not expressly mention prejudgment interest, and Arizona law would sharply restrict such interest on the claim.

Which source of law should the federal district court consult first to determine whether prejudgment interest is available?

Explanation. The majority held that under Section 1988, the court first looks to federal law to see whether it is suitable to carry the civil rights statutes into effect. Even when no general federal statute expressly addresses prejudgment interest, federal case law can provide sufficient guidance. Because prejudgment interest is treated as an element of compensation and Section 1983 damages are compensatory, federal law governs if it supplies that guidance. (Derived from Golden State Transit Corp. v. City of Los Angeles (n.d.).)